The Measurement Of My Country's Systemic Financial Risks

After the subprime crisis in 2008,the international financial situation experiences a great change as the interrelationship between financial institutions and regional economic organizations keeps being intensified and thus result in a relative high financial risk.In terms of the domestic situation,China also accumulates a great deal of financial risks due to the internal vulnerability of the system,the flow of the fund to emptiness,the increase of the debt of the enterprises.The report of the 19^th CPC National Congress also points out that we should protect our economy from financial risks and hold the base line that we could never let a financial crisis break out.Thus,it is imperative to measure the systematic financial risk in China and have a thorough inspection of that.The root of systematic financial risk in China is high leverage,and our financial risk accumulates in 8 dimensions:financial institutions,stock market,bonds market,currency market,FX market,real estate market,government?and enterprises.In addition,the fuses that may lead to financial crisis also exist in the same 8 dimensions.According to the conditions above,the paper adopt synthetical index method which could effectively avoid the limitation brought by using only one index to measure the financial risk in China.And the adoption of synthetical index method seems to be more reasonable under our national conditions of socialism and the deficiency as well as the discontinuity of our financial data.We chose the indexes from 8 dimensions including financial institutions,stock market,bonds market,currency market,FX market,real estate market,government?and enterprises,using Entropy Method to determine the weight of those indexes in order to synthesize them into financial risk condition index in 8 dimensions.The results show that the financial risk condition index in 8 dimensions synchronize with the real situation well.And the systematic financial risk index in China which is calculated depending on the different weights of the 8 dimensions reflects the actual status.Besides,using Threshold approach and Markov state transition method to judge the current financial status,we concluded that China's risk is in moderate condition though there is no sigh of a descending trend of it.So,to better prevent from and dissolve the systematic financial risk,we should pay our efforts in terms of real economy field,finance field and supervision.For real economy field,we should push forward the reform of state-owned enterprises and institutions of real estate market,standardize and develop the financing platform of local government.For finance field,we should insist on the reform of stock market,bonds market,currency market,promote the steady functioning of financial institutions.For supervision,we must change the way of that and switch to macroprudential regulation.